HOW TO NEGOTIATE WITH FREELANCERS & SMALL BUSINESSES
The meeting had gone well, a brief taken and, a week or so later, a response delivered. During the follow up call the prospect told me he liked my proposal very much indeed. Then it all went quiet...
"So,” He began hesitantly, “can we negotiate?”
"Sure,” I said, sensing a strong buying signal, “you go first.”
“I’m sorry?” He asked.
“You start.” I urged.
“Start what?” He asked again.
“Negotiating.” I responded cheerfully - I do love a good negotiation!
“I don’t understand, can I have a discount or not?"
Oh dear. Huston, we have a problem.
“Oh, so you don’t want to negotiate, you just want a discount?” I clarified.
“Why?” I asked.
This really stumped him. Why? Why should I provide my services to him at less than they are worth? It’s an interesting question isn’t it? I’d been issued a brief, crafted a response with pricing, which the prospect liked and was eager to buy…just not for what I determined it was worth.
Most advice on negotiation is really, really bad. For proof read literally any commentary about Brexit, largely written by academics and journalists with very little hands on experience. Play your cards close to your chest, they all say, don’t reveal your hand. What codswallop! If you don’t reveal the areas in which your are prepared to give a little then the negotiation can never begin. And almost all freelancers and small businesses are prepared to give in the same areas, namely:
Every freelancer and small business struggles with cashflow. Mainly because, despite any payment terms that may appear on their invoice, they really have no power to enforce them. So 30 days becomes 60 days becomes 90 days, then the invoice is lost and despite the miraculous wonder of digital transformation finance swears they need the original posted back to them and because the self-employed don't have time to stand in a post office queue all day they resort to surviving on savings and/or credit, depending on which runs out first!
(By the way, If governments REALLY wanted to help the small businesses they constantly claim are 'the backbone of our economy', they would simply make it illegal to pay them more than 30 days after invoicing. However, governments care far more about large corporations than small business so that will never happen and cashflow will continue to be a problem.)
That being the case, most freelancers and small businesses are willing to drop their prices anywhere from 5 - 20% in return for up front payment.
Related to cashflow is pipeline. When not chasing existing customers for money, freelancers and small business are looking for new ones, which is expensive, time consuming and often inefficient with a low hit rate. However, if you can offer them volume or longevity of work they will, once again, be willing to give you a 'bulk buy' discount of 5 - 20%.
'But what if they’re untested?', I hear you cry, 'How can I promise them more work before I’ve seen what they’ve done?' Simple. Either pay full price for a pilot and claim the discount retrospectively when you green light the rest of the work OR make the long term contract contingent on satisfactory delivery of the first deliverable. This does mean spending a little time time with legal and/or procurement to create some wording that defines terms such as 'satisfactory' but if you're looking for ways to save it's worth it.
Finally, almost every entrepreneur I know is trying to get further up the value chain; closer to decision makers and, let’s face it, actual decisions. As such, if you can guarantee your freelancer or small business partner a face to face with your head of department, country or region they will reward you with a 5 - 10% discount.
But I do mean guarantee. A fixed meeting, in the diary, confirmed by both parties before contracting. I only believe in good faith if it’s written down, signed off and witnessed!
So, now you know. Next time you ask for a “negotiation”, you can actually negotiate rather than ask for a discount for no reason, which is awkward for everybody. You can offer non-monetary value in terms of up front payment, volume deals or executive access in return for real monetary discounts on the work, because in a true negotiation everybody should leave feeling like a winner.